Chinese electric vehicle (EV) maker Li Auto Inc. (NASDAQ: LI) stock has rallied off its lows to the upper end of its trading channel. The maker of hybrid EVs is the fastest grower among the big three Chinese EV makers. EV stocks have had a boom, bust and recovery cycle all inside of one-year as the electrification trend combined with the decarbonization movement and ESG thematic investing led to a perfect storm situation, despite lack of profits. Stocks got ahead of themselves on speculation, then reality set in. Now, the real contenders are rising again. Li Auto is a true contender, not a pretender. As the pandemic is put in the rear view mirror and more commuters take to the road, Li Auto should be a benefactor of the automotive recovery tailwinds. While the Chinese government has been cracking down on rideshare, internet, ecommerce, and social media companies, they have left the EV makers alone since they are literally partnered with them. Prudent investors looking for safety in the Chinese government crackdown tempered with growth of EV penetration and adoption can look for pullbacks in shares of Li Auto.
Q2 2021 Earnings Release
On Aug. 30, 2021, Li Auto released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported earnings-per-share (EPS) of (-$0.01) missing consensus analyst estimates for breakeven. Non-GAAP losses from operations were (-$56.6 million), up 62.6%. Revenues rose 41.6% year-over-year (YoY) to $780.4 million, beating consensus analyst estimates by $69.07 million. The Company delivered 17,575 Li ONEs representing a 166.1% YoY increase. The Company has 97 retail stores covering 64 cities and 167 servicing centers and Li Auto-authorized body and paint shops in 127 cities.
Li Auto CEO and CFO Comments
Li Auto founder and CEO Mr. Xiang Li commented, “Our remarkable second quarter results reflect the undeniable strength and appeal of our Li ONE. The 2021 Li ONE received rave reviews and strong endorsement from users, contributing to our second quarter deliveries of 17,575 vehicles and July deliveries of 8,589 vehicles, resulting in cumulative deliveries of over 70,000 vehicles. We are also excited to share that Li ONE topped sales charts in the large SUV and new energy SUV categories in July, making us a leading domestic NEV manufacturer in China.” Li Auto CFO Mr. Tie Li added, “We have achieved outstanding performance in the second quarter, with total revenues hitting a record high of RMB5.04 billion, up 158.8% from the same period last year and an increase of 40.9% from RMB3.58 billion of last quarter, mainly driven by higher deliveries. Our vehicle margin reached 18.7% this quarter, up 5.0 percentage points year over year, and gross margin stood at 18.9%, demonstrating our consistently effective cost management approach. “With the completion of our global offering and dual primary listing, we successfully raised over US$1.5 billion in net proceeds, positioning us well for future growth. We expect our enhanced product lineup and increased deliveries following production ramp-up to help us continue to deliver strong results.”
Conference Call Takeaways
Li Auto President Kevin Yanan Shen commented, “Going forward, we’ll continue to collaborate closely with our supply chain partners to mitigate the semiconductor shortage and minimize the impact on our production. Given the proven success of our Li ONE catering to the needs of families, we are working to diversify our product portfolio to appeal to an even broader family-user base. We have 3 platforms under development; the X platform for our next-generation EREV, with the first model to be released in 2022; and the Whale and the Shark platform for our BEV models to be launched in 2023.The development of these new platforms is progressing smoothly, and we are confident to launch new vehicle models sometime. In July, we also signed an MOU with a local Company for collaboration in the reconstruction and expansion project of an automobile manufacturing plant in Beijing. This will further expand our production capacity and support increasing vehicle sales volume with future models.” He continued, “On August the 27th, 2021, we also signed an investment agreement with a wholly-owned subsidy — subsidiary of Xingchen China Power Holdings Limited to form a new Company in [Indiscernible] Sichuan Province, China, to develop and manufacture our next-generation extension system. Do we firmly believe that smart EREVs will be a superior replacement costs and the increase the overall AEV penetration rate in the medium to long-term.”
August 2021 Deliveries
On Sept. 1, 2021, Li Auto announced the August 2021 delivery figures. Li Auto delivered 9,433 Li ONEs, up 248% YoY and 9.8% sequentially. Total deliveries for the first eight months of 2021 were 48,176 Li ONEs and 81,773 cumulatively. The Company had 114 retail stores in 69 cities. The Company projects total deliveries for Q3 2021 to range between 25,000 and 26,000 units.
LI Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frame provides a near-term view of the landscape for LI stock. The weekly rifle charts peaked at the $47.72 Fibonacci (fib) level. Shares fell near $16 before staging a rally back up to peak off the $36.66 fib. The weekly rifle chart has a make or break set-up with a falling 5-period moving average (MA) at $29.44 under the 15-period MA at $15.64 with a stochastic mini inverse pup. This looks bearish at first glance, but it’s a make or break that can form a bullish pup breakout if the weekly stochastic can cross back up and weekly 5-period MA starts to rise again. The daily rifle chart formed a pup breakout with a rising 5-period MA at $30.37 after triggering the weekly market structure low (MSL) above $29.12. The daily stochastic has a mini pup stretching towards the 80-band and upper Bollinger Bands (BBs) at $32.51. Prudent investors can watch for opportunistic pullback levels at the $29.51 fib, $29.01 fib, $27.96 fib, $27.58 fib, $26.21 fib, $24.98 fib, and the $23.74 fib. Upside trajectories range from the $36.66 fib level up to the $47.11 fib level.